If you’ve realized net capital gains to date this year, but have losses in your portfolio, realizing some losses by year-end can save tax dollars at no economic cost other than, possibly, trading commissions.

Specific Details

The taxpayer reduced their taxable income by $3,000 by taking tax-saving losses before the end of the year. Since the taxpayers income was taxed at the 20% tax bracket, the income reduction may decrease their income taxes by $600 ($3,000 x 20%).

Potential Savings

If you are in a combined (federal, self-employment, and state) tax bracket of 20%, you could reduce your taxes up to $200 for every $1,000 of income reduction by taking tax-saving losses before the end of the year.